Builders work on the Stateside Lodge and Hotel at Jay Peak funded by EB-5 investments on July 15, 2013. / MADDIE MCGARVEY/FREE PRESS

Written by

Dan D’Ambrosio

Free Press Staff Writer

Jay Peak Resort president Bill Stenger looks at proposed development plans and maps in his office on Monday, November 19, 2012. / GLENN RUSSELL/FREE PRESS

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Jay Peak co-owner Bill Stenger said Wednesday the controversy that erupted Tuesday in Washington D.C. around the EB-5 program and U.S. Citizenship and Immigration Services Director Alejandro Mayorkas won’t affect his efforts to bring foreign investment into the Northeast Kingdom.

The Associated Press reported Tuesday that Mayorkas, President Barack Obama’s choice to be the No. 2 official at the Homeland Security Department, is under investigation for allegedly improperly helping a Virginia company secure approval for a Chinese investor who had been rejected for the EB-5 program overseen by U.S. Citizenship and Immigration Services (USCIS).

“I don’t think it will do any damage to our program or what we’re doing,” Stenger said. “It is something that appears to be under review and hopefully will be concluded shortly. I don’t know what the outcome will be but hopefully Director Mayorkas is exonerated.”

Under the EB-5 program, foreign investors can secure green cards for themselves and their families by investing $500,000 in projects in areas of the country with high unemployment, or $1 million in other parts of the country. If those projects create 10 full-time jobs after two years, the investors receive their green cards.

Stenger has put together one of the largest EB-5 programs in the nation in the Northeast Kingdom, with a plan to raise $600 million from foreign investors for improvements to Jay Peak and Burke Mountain resorts, as well as projects in Newport that include a new hotel and conference center, a new downtown block of shopping and residential units. Stenger is also opening a biotechnology company and high-tech window manufacturer in Newport.

Stenger said Tuesday that about 20 percent his EB-5 investors are Chinese, and that none has ever been rejected by USCIS. All EB-5 investors must prove the funds they are investing come from legal sources, and in the case of China, investors cannot be members of the Communist Party.

“In most of our investors’ cases their investment comes from the appreciation of the ownership of real estate they’ve had for a number of years in China,” Stenger said. “”They’ve owned a piece of property for a number of years, sold the property and the proceeds of the sale are used for the investment. That’s very common. We also have people who own businesses in China.”

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Stenger said China is a “very big market” for EB-5 investors, but that his project is probably the largest in the nation that does not rely predominantly on Chinese investors.

“We have investors from all over the world,” Stenger said. “In the last week we have had investors visit Jay Peak from five different countries — Saudi Arabia, Egypt, South Africa, Thailand and Taiwan.”

The AP reported that the investigation by the Homeland Security Inspector General Office began last year on a referral from an FBI analyst in the counter intelligence unit in Washington. The FBI has been concerned about the EB-5 program and the projects it’s funding since at least March, according to the AP.

The primary complaint against Mayorkas, the AP reported, was that he helped a financing company run by Anthony Rodham, the brother of former Secretary of State Hilary Rodham Clinton, to win approval for a Chinese investor even after the application to the EB-5 program was denied and an appeal was rejected.

An email from the Inspector General’s office to lawmakers sent Monday evening obtained by the AP also includes allegations that other USCIS Office of General Counsel officials obstructed an audit of the visa program by the Securities and Exchange Commission. The email did not name any specific official from the general counsel’s office.

The AP also obtained an unclassified State Department report about the EB-5 program that says in China “applicants are usually coached and prepped for their interviews, making it difficult to take at face value applicants’ claims” about where their money comes from and whether they are members of the Chinese Communist Party.

Doug Hauer, partner at the Boston law firm Mintz Levin, said Tuesday, he believes there’s a “huge issue” concerning how Chinese investors in the EB-5 program are manipulated by immigration lawyers and others.

“It’s unsurprising that Chinese applicants are coached and prepped for interviews and are unable to substantiate any of the facts in their own cases,” Hauer said. “They’ve been coached by immigration lawyers and by consultants and they don’t understand what they’ve invested in. In my opinion, every investor who puts $500,000 into an EB-5 program should have at least visited the investment or should at least understand fully the documents that they’ve signed.”

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Hauer said he believes a lack of financial expertise within the USCIS also leads to improper rejections of EB-5 applications. He said Mintz Levin has clients who have come to the firm for help after their cases have been denied.

“I think USCIS does not have the expertise to read securities documents or to truly understand complex issues such as source of funds,” Hauer said. “Supposedly the agency is now better positioned to understand these issues, but in the EB-5 process what is lacking is true expertise at the agency, and this leads many times to unfair denials or denials that aren’t based in a normative reading of the law.”

On the “other side of the spectrum,” Hauer said, there are also successful applications that should never have been approved.

“In the next couple of years, the SEC will be looking at the entire EB-5 program more carefully,” Hauer said. “There needs to be tighter control and tighter interagency involvement in the EB-5 process. There are too many EB-5 petitions filed for Chinese investors who have no idea what they’ve invested in and who are unable to explain to a U.S. consulate the basis of their investments.”

Brent Raymond is director of the Vermont Regional Center for the EB-5 program, the only regional center in the country owned and operated by a state. Raymond said Tuesday that in his opinion Mayorkas has improved the EB-5 approval process, “both as far as strengthening review as well as making it more streamlined and predictable.”

Raymond pointed out that in its email to legislators, the Inspector General’s office said it did not have any findings of criminal misconduct at this point, and that it has not specified criminal violations specific to Mayorkas. Raymond also lauded Sen. Patrick Leahy’s legislation introduced earlier this summer, saying it “does everything to strengthen oversight.”

“Sen. Leahy’s efforts can only improve what is already a well-regulated program,” Raymond said.

Leahy’s legislation passed the Senate in June as part of the immigration reform bill, which has stalled in the House. The legislation would make the EB-5 program permanent, in addition to providing additional oversight tools to ensure that all users of the program are in full compliance with securities laws.

The legislation also permits the Secretary of Homeland Security to bar those who have been liable of financial or other crimes from using the program, and to conduct background checks on potential regional center managers. Regional Centers would have to provide detailed annual reporting to track the progress of investment projects.